Decision Making

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“Our world is awash in data, and data is not the same thing as facts,” writes Boston College's Sam Ransbotham. “While data seems to promise objectivity, instead it requires analysis — which is replete with subjective interpretation.” Ransbotham argues that while having data is a necessary step towards making objective decisions, it’s a myth that data is objective. Moreover, findings that counter current thinking provide organizations with opportunity for distinction, differentiation and advantage.

In an era of information overload, getting the right information is a challenge for time-pressed executives. How can they best distinguish usable information from distracting noise? New research argues that to remain appropriately and effectively knowledgeable, executives need a personal and organizational capability to continually “stay in the know.” And that means assembling and maintaining a “personal knowledge infrastructure” built on both technologies and conversation.

General Mills brought a data scientist into its Consumer Insights group because it wanted to use its existing data more effectively. The company thought it was making decisions based too much on outside data at the expense of what it knew. But figuring out what the company actually knew about its consumers was the challenge facing Wayde Fleener as he came on board. In an interview with MIT SMR’s Michael Fitzgerald, Fleener talks about how he got started in building a Big Data practice within his division.

When faced with information overload, it can be easier to make good decisions if you're able to remove yourself from all the details of the decision and consider the choices more abstractly. Research shows that such distancing, which can be either temporal or physical, can help people to filter out the less-vital details and enable them to focus on the gist of the matter.

How do managers “decide how to decide”? Boards and management teams often try to gain consensus, but that’s not always the best course. Research offers insights into when consensus building is the right way to go and when it isn’t — and how leaders can determine the best form of decision making for a given situation. “By prompting a rule on how the decision will be made — by unanimity, majority or delegation — you can significantly influence what will be decided,” note the authors.

How well do people factor past performance into their expectations for the future? Not very. In one study, for instance, students playing darts who did well in the first round bet that they would beat the improvement goals of those who did worse. They generally were wrong: the better the participants’ score in the first round, the less likely they were to improve as much as other participants in the second.

It’s common for people to worry that reaching out for advice will make them appear less competent, according to research from Harvard Business School and the Wharton School. But if the task is seen as difficult, the advice-seeker is actually viewed as more competent. In addition to establishing a connection between people’s willingness to ask for advice and others’ perceptions of their competence, the authors found that whom people ask for advice makes a difference in how they are viewed.

Analytics acts as an amplifier for business processes. In business, as in music, “louder” does not always mean “better,” so companies seeking to increase their analytics capacity should keep in mind four principles that underscore its limitations for business.

For many decisions, letting your mind wander to a choice that you feel drawn to — rather than laboriously weighing all the options — is more than ample. Researchers Colleen E. Giblin (Tepper School of Business, Carnegie Mellon University), Carey K. Morewedge (Boston University School of Management) and Michael I. Norton (Harvard Business School) say that while mind wandering is probably not suited for making weighty decisions, it is a less onerous way to sort through options for many decisions.

How much choice do people really want? Asking people to make their own choices requires time and focus — there's all those options to consider. Harvard Law School professor Cass R. Sunstein writes that default rules, which establish starting points for everything from rental car agreements to health insurance plans, can save people time and keep them from being overwhelmed by too much choice.

Social media platforms provide two key capabilities in the enterprise context — managing networks and sharing digital content. The problem is, with multitudes of platforms available — and features changing daily! — it’s hard to pick among them. Blogger Gerald C. Kane outlines a simple method for making optimal decisions about which social media platforms an enterprise should use.

The Winter 2015 issue of MIT Sloan Management Review highlights decision making, in “The Power of Asking Pivotal Questions” and “Using Simulated Experience to Make Sense of Big Data.” It also celebrates acknowledging when you don’t have all the answers, in “Embrace Your Ignorance.” Other articles look at “technostress,” why product category labels matter and why "benevolent" mobile apps may be best at brand-building.

Curiosity about the decision-making process has heated up, attracting academics from neuroscience, management, behavioral economics and psychology. Researchers have found, for instance, that a willingness to ask for advice on difficult problems can increase a person’s perceived competence, and that too many choices can cause people to make less-than-optimal choices. Here, we highlight six scholarly articles that have intriguing insights into the factors that can affect decision-making.

Good strategic thinking and decision making often require a shift in perspective — particularly in environments characterized by significant uncertainty and change. Managers can make better decisions by examining both broad market trends and less visible undercurrents. But the questions leaders pose sometimes get in the way of solving the right problem or seeing more innovative solutions. Here, the authors present six questions that challenge executives to incorporate broader perspectives.

As data analyses get more complex, how can companies best communicate results to ensure that decision makers have a proper grasp of the data’s implications? Research has found that letting decision makers gain experience on the outcomes of different possible actions by interacting with simulations helps those executives make better decisions. Simulations narrow the often a large gap between what analysts want to share and what decision makers understand, and more clearly illustrate complex statistical information.

The role of managers needs to be redefined in today’s knowledge-based economy. Managerial authority remains essential in situations where decisions are time-sensitive, knowledge is concentrated and several decisions need to be coordinated. As well, an important task for today’s managers is to define the organizational goals and principles that they want employees to pursue. “From our perspective, the view that executive authority is increasingly passé is wrong,” write the authors.

Using analytics to guide your business decisions sounds like a great idea — until your company falls prey to one of the four common mistakes that consultant James Taylor says many businesses make. At a recent Boston seminar, Taylor outlined these errors and offered steps for how companies can avoid them.

The former senior vice president of vendor analytics at Bank of America is now chief analytics officer at Bank of America Merchant Services. While Merchant Services is technically a separate business, Douglas Hague’s ascension to the C-suite is notable in that it’s one of the first analytics roles to report directly to the CEO at Bank of America Merchant Services. That has some implications for strategy and for long-term planning.

Business executives today have access to far more data than any previous generation, and that transforms the way business decisions are made. The Winter 2014 issue of MIT Sloan Management Review features a special report investigating how, even with plenty of data, making wise decisions about topics like strategy can be challenging. No matter how much data we collect and analyze, our perspectives are still colored by human foibles.